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HP to keep PC division, rejects spin-off idea

Whitman rejects path set by former CEO Apotheker

October 27, 2011 04:37 PM ET

Computerworld - Hewlett-Packard Co. has decided to keep its PC division. So says its newly appointed CEO Meg Whitman.

Whitman, the former eBay chieftain, categorically rejected a plan offered up by her predecessor, former CEO Leo Apotheker, to either sell or spin-off this division. HP announced the decision after the close of financial markets today.

In its announcement, HP said it conducted a "data-driven evaluation" of the impact of cutting off its Personal Systems Group (PSG) and concluded that it was just too important to its supply chain, procurement and overall brand.

"HP objectively evaluated the strategic, financial and operational impact of spinning off PSG. It's clear after our analysis that keeping PSG within HP is right for customers and partners, right for shareholders, and right for employees," Meg Whitman, HP president and CEO, said in a statement. "HP is committed to PSG, and together we are stronger."

HP is the world's largest manufacturer of personal computers.

As Whitman considered a spin-off, rival CEO Michael Dell worked to capitalize on HP's self-imposed uncertainty while also offering advice. Dell believed a spin-off or sale was a bad idea, and argued that despite sluggish PCs sales, "it's a growth market."

Dell has predicted that the number of PCs in the world would grow from 1.5 billion now to about 2 billion in a few years.

Other critics of the idea argued that the separating the PC division from HP's other product lines would hurt the company's ability to sell into enterprises and would cost it some leverage in buying parts, such as disk drives.

Apotheker saw the PC division as a low-margin distraction and believed relieving HP of it would help it better focus on software and services, high-margin areas for the company. IBM took a similar path years ago with its PC division.

Apotheker was removed from his post by the board on Sept. 22. Whitman was promptly tapped to replace him and the company quickly began backing off Apotheker's plans.

This is Whitman's first big strategic decision for HP. In keeping the PC division, she is holding on to a division that generated $40.7 billion in revenues in 2010.

Patrick Thibodeau covers cloud computing and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at Twitter @DCgov or subscribe to Patrick's RSS feed Thibodeau RSS. His e-mail address is pthibodeau@computerworld.com.

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